(1) Field of the Invention
The present invention relates generally to a system and method for making charitable contributions electronically through asset-holding organizations, and receiving an immediate tax deduction for such contributions.
(2) Description of the Prior Art
Contributions made to organizations meeting the requirements of §§170(b)(1)(A), 170(c), 2522, and 501(c)(3) of the Internal Revenue Code, commonly referred to as “qualified charitable organizations,” are generally treated as tax-deductible to the donor. Such organizations include, but are not limited to, private foundations, community foundations, donor-advised funds, gift funds, and supporting organizations. As used herein the term Foundation, or the abbreviation Fdn, is intended to encompass all of these qualified charitable organizations.
In order to qualify as a charitable organization, a Foundation must be organized and operated exclusively for one or more of the purposes set forth in §501(c)(3) and none of the earnings of the organization may inure to any private shareholder or individual. In addition, the Foundation may not attempt to influence legislation as a substantial part of its activities, and may not participate at all in campaign activity for or against political candidates.
The exempt purposes set forth in §501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and the prevention of cruelty to children or animals. The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erection or maintenance of public buildings, monuments, or works; lessening the burdens of government; lessening of neighborhood tensions; elimination of prejudice and discrimination; defense of human and civil rights secured by law; and combating community deterioration and juvenile delinquency.
When a contribution is made directly to a Foundation, such as by writing a check to the Foundation, or by transferring ownership of securities or another type of asset, the donor immediately receives a receipt that is evidence of the contribution, which can be used by the donor to support a tax deduction. However, the currently available mechanisms that permit a donor to indirectly make a donation are limited to services provided by major brokers, such as the Donor Advised Fund managed by Fidelity Investments.
In these broker arrangements, the donor is given evidence of a charitable contribution at the time the donor instructs the broker to irrevocably transfer funds to the donor-advised fund. The donor can later designate charities to which the funds are to be transferred. These existing mechanisms are limited in their utility, however, and do not provide the donor with the opportunity, or motivation, to transfer assets that are held by for-profit asset holders, such as banks, or other brokers.
Thus, there is an existing need for a system and method that will enable a donor to electronically transfer assets from an asset holder to qualified charitable organizations, while receiving an immediate tax deduction. There is a further need for a system and method that will enable the donor to make charitable contributions at the time other transactions are conducted with the asset holder, thereby motivating the donor to make charitable donations.